MUMBAI: India’s healthcare industry is worried that the implementation of the goods and services tax (GST) may lead to higher taxes that could erode its profits, even as it hopes that the new regime will help streamline the supply chain.

The nearly $10 billion pharmaceuticals industry is currently required to pay eight different types of tax at various stage of operation.

“The biggest advantage to the industry would be that of reduction in transaction cost, with an immediate impact coming from the discontinuance of central sales tax (CST).

The multistage taxation along with the inability to take the full benefit of the CENVAT (central value-added tax) credit/refund has been an issue for the industry,” Manish Panchal and Siddharth Paradkar of Tata Strategic Management Group said in a report.

Analysts were sceptical, however, about the impact on the profitability of companies.

“GST will help companies rationalise their supply chain. However, if the overall tax cost goes up above 12% there won’t be any savings as such,” said Hitesh Sharma, partner at EY, a consultancy firm. The medical devices industry too is feeling the jitters, especially the companies that import devices such as stents and radiology machines, and do not have to pay tax for storing consignments of imported goods.

Such goods may get covered under GST, but there is no clarity yet on how the tax will be structured.

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